Gifts from Family Can Increase Your Support Obligations following Separation
The Ontario Superior Court of Justice recently imputed a significant income, for support purposes, to a father who had claimed that his parents had been funding much of his expensive lifestyle.
The parties were married for 23 years and have three children. They are both lawyers, lived in an expensive neighbourhood in Toronto, had a chalet in Collingwood, and all three children attended private school.
According to Justice Harvison Young:
there is no dispute that these parties lived “a million dollar lifestyle” during their lengthy marriage, however, the question that [must be determined] is whether the parties’ lifestyle was funded by the husband and whether he had the means, then or now, to support it.
The husband practiced law until 1997, after which he had a series of business ventures. In 2016 he returned to the practice of law, and started a new firm specializing in real estate.
In addition to employment income, he received rental income from a commercial property that he owned, in part, along with his parents and sister. The building was sold in 2015 for $8.9 million.
Further to these two income streams, the husband also received substantial support from his parents.
The parties sold their matrimonial home in April 2015 and divided the net proceeds. The wife entered into a one-year lease with the purchaser and continued to live in the home with the children. The husband agreed to pay half of the $11,500 monthly rent. He also leased a home for himself on the same street and was paying $12,000 in rent, monthly.
The Wife’s Position
The wife claimed that the husband had been the sole breadwinner during their relationship. She had not worked since 1999, when she began to have children and stayed home as their primary caregiver. While the husband had gone through periods of unemployment, their lifestyle and spending never fluctuated.
She sought interim child and spousal support based on the husband’s reported 2015 income ($1,800,000).
In the alternative, she sought support based on income that could be imputed to him based on his budget, lifestyle, and continued support from his parents.
In the further alternative, she sought support based on the needs of herself and her children, which would infer an income of approximately $1,200,000.
She argued that the husband’s lavish lifestyle, both during their marriage, and after its breakdown demonstrates that he was either misrepresenting his income, or he was intentionally under-employed and living off gifts from his parents. Additionally, the money he was receiving from his parents are not “loans”, contrary to his assertion.
The Husband’s Position
The husband argued that calculating support based on his 2015 income would be unfair because his income that year had been exceptional as it included a one-time capital gain from the sale of the commercial property he co-owned with his family, and was, therefore, not a true reflection of his financial circumstances. Rather, the support calculation should be based on a yearly income of $275,000.
The husband claimed that during the marriage the family lived, and then continued to live, beyond its means. In addition, the family was only able to maintain its lifestyle due to a series of loans from his parents, but that his parents were no longer willing to continue to provide such loans. He was careful to classify the money received from his parents as loans not gifts, and also claimed that he therefore owed them a great deal of money.
Should the Parental Support be Considered as Part of the Husband’s Income?
Justice Harvison Young reviewed the law on whether gifts should be included in determining income. The Court of Appeal had laid out some factors to consider when making such a determination:
- The regularity of the gifts;
- How long the gifts had been received for;
- Whether the gifts were part of a family’s income during cohabitation and created a certain lifestyle;
- The circumstances of the gifts;
- Whether the gifts do more than provide a basic standard of living;
- The income generated by the gifts in relation to the payor’s entire income;
- Whether the gifts are given to support an adult child through a period of disability or other crisis;
- Whether the gifts are likely to continue; and
- The true purpose/nature of the gifts.
In this case, Justice Harvison Young found that the flow of funds from the husband’s parents to the family had been regular and continued throughout their relationship. It had always included the entire tuition of the three children at their private school (approximately $80,000 total, annually). In addition to the significant amount to cover tuition, the amounts had been “very substantial” and done more than provide a basic standard of living. The gifts allowed the family to live in one of the most expensive neighbourhoods in Toronto in an expensive home, allowed both parents to drive new and expensive vehicles, to travel extensively, and for all three children to participate in competitive skiing. Overall,
Given that the advances continued throughout the marriage and, on [the husband’s] own evidence, continue to bridge the gap between his $682,000 in annual expenses and his $250,000 annual income, it is impossible to conclude that the amounts did not form a major, integral, and essential part of the family’s income and have continued to do so for [the husband].
The Judge did not accept the husband’s assertion that the money that had been advanced to him during and after the marriage were loans rather than gifts. Firstly, there was no documentary evidence suggesting the money had been loans not gifts.
It is the absence of documentation on [the husband’s] part (particularly in relation to the monies advanced by his family before and after separation as discussed above) that make such determinations difficult at this time. It would not be fair pursuant to the Guidelines to ignore a source of income for the family that has clearly contributed very materially to their lifestyle throughout their marriage.
The Judge concluded that there had been no expectation that the money the husband’s parents had given him was intended to be repaid, or that the flow of the funds had stopped or changed in character.
Furthermore, the Judge noted the inconsistencies in the husband’s assertions. On one hand he had argued that his parents were no longer willing to provide him with money to support the family. On the other hand, he had argued that their funds had bridged the large gap between his annual expenses and his income. The Judge noted that:
I do not accept that an educated and sophisticated professional such as [the husband] would make the choices he is still making in terms of his lifestyle if his income for support purposes was as little as he claims, or that every amount advanced from his parents had to be repaid.
The Judge ultimately concluded that the money that the husband had received from his parents could be considered in determining his income for support purposes.
The husband’s income was imputed at $1,200,000.
Based on that income, support obligations were calculated as follows:
- Monthly interim child support in the amount of $17,731 for all three children;
- Monthly interim spousal support in the amount of $9,376.
If you have questions about support obligations following a separation or divorce, speak with experienced Windsor family law lawyer, Jason P. Howie, at 519.973.1500 or contact us online. We serve clients in Windsor, Essex County and throughout the region.